From 22nd November, only vape products (e-cigarettes and e-liquids) that comply with all the requirements of the Tobacco and Related Products Regulations 2016 (TRPR) can be manufactured or imported to the UK.
Whilst IBVTA members have worked hard and spent a significant sum of money to meet this deadline, it must be noted that some companies have been entirely (and often wilfully) ignorant and unprepared for their responsibilities under new regulations.
If “doing the right thing” is not to become a disincentive, as well as a competitive disadvantage, it is vital that these new regulations are policed and enforced from day one (22nd November). With this in mind, IBVTA has written to all politicians calling on them to do what they can to raise the issue of policing and doing what they can to ensure that non-compliant vape products are not being sold within their constituencies. To date the response has been encouraging.
At the same time as the industry is dealing with the implementation of the TRPR and any potential lack of policing, the European Commission has launched a consultation on proposals to introduce EU-wide additional taxation for vape products.
Every four years the European Commission (DG TAXUD) reviews the European Directive on the structure and rates of excise duty applied to manufactured tobacco (Directive 2011/64/EU). This review is currently taking place and for the first time the inclusion of vape products within the Directive is being considered. In practice this would see the Commission setting a common excise regime for vaping across all 28 Member States. If the Commission went ahead with this, it would see vape products subjected to additional taxation and impose additional costs and administrative burdens on the industry. Critically, it would make the end product more expensive which would act as a disincentive to switching from smoking to vaping.
Last week the European Commission published their consultation on this subject. In the consultation, it seeks views on a tax rate of between 20 and 50 per cent.
As an association, we are constructively involved in all of the above; urging politicians to support our calls for the new TRPR regulations to be policed, and engaging with Commission and HM Treasury officials so that they are fully aware of our position on additional taxation of vape products – we are against it!
2015 saw vape industry growth of 24 per cent on the previous year making it the fastest growing industry in the UK and one of the fastest growing in the EU as a whole. Dedicated vape shops are also one of the few areas of growth on high streets throughout the EU according to research from PwC and the Local Data Company. Despite this the industry is young and not well established. It is therefore vulnerable to changes in fiscal and regulatory regimes in a way more established sectors are not. Dr Konstantinos Farsalinos’ research shows smokers’ perceptions of risk are very far from accurately aligned with reality. This affects their smoking/vaping behaviour. When you combine this with the immaturity of the industry, it is likely that the levying of additional taxation is likely to have a negative effect on the legitimate industry, not just in terms of vapers going back to smoking, but also the rise of an informal economy. The higher the rate of excise the more devastating its impact will be.
There is also the cost of compliance with an excise regime. A typical IBVTA member would be faced with having to pay initial capital costs in the region of £50,000 and annual costs of roughly £40,000. These costs are simply unbearable for the smaller companies operating in this sector, particularly coming on top of the costs of TRPR compliance.
Who would benefit from vape products being taxed in this way?
Smokers and vapers would not benefit as excise would only make a less harmful alternative to tobacco cigarettes more expensive. As we have seen from Italy and Portugal, where excise has been introduced, fewer people switched to vaping and many vapers went back to smoking. It is unlikely that governments would benefit as the revenues generated from excise on vape products are likely to be relatively small compared to the costs of implementing and collecting it. Those with a genuine interest in public health would also lose out. The only beneficiaries would be the tobacco and pharmaceutical industries as they would see a competitor product made more expensive which would result in fewer people switching from smoking to vaping and a large number of people moving back to smoking and NRT products.
The key health benefit of vaping devices is determined by how many smokers switch to them or use them as a staging post to quitting completely. It is therefore vital that they continue to be regulated and taxed as a consumer product. Many smokers have tried numerous times to quit using conventional NRT products and have failed, however with vaping they have all cut down their smoking or stopped completely. Vape products are however not some form of more effective NRT, they are totally different and need to be regulated and taxed accordingly.
If regulators, working with responsible vape product companies, develop the appropriate robust and proportionate regulatory and taxation regime then vape products can flourish and truly fulfil their potential in providing a viable and significantly less harmful alternative to tobacco products. However, if regulators and tax authorities introduce inappropriate and disproportionate regulatory and fiscal regimes then smokers will not make the switch and a once in a life time opportunity will have been missed. It is within this context that the debate surrounding the potential levying of excise on vape products must be considered. Now is not the time to be considering excising vape products.
Independent British Vape Trade Association